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If you apply for a parental loan PLUS, you must undergo a credit check. If the report shows that you have a negative credit history, your application may be denied. You may have a negative credit history if your credit reports show a foreclosure, tax lien, prior wage garnishment, garnishment, or write-off of prior federal student aid debt.
Unfortunately, some potential borrowers are unaware of their negative credit history until they apply for a Parent PLUS loan. Even if you are rejected, there are still other options available to help fund your child’s college education.
Aside from the state Parent PLUS loans, you can consider a private student loan to help cover your child’s college costs. Believable lets you Compare interest rates on private student loans from multiple lenders, all in one place.
Borrow additional unsubsidized federal loans
Even if you are denied a Parent PLUS loan, your child may still be eligible for a direct, unsubsidized federal loan if they are deemed a dependent student. If your Parents PLUS loan application is denied, your child’s credit limit could potentially be increased.
Depending on your child’s status — whether they’re an undergraduate or graduate student and what semester they’re entering — they may be eligible for an annual loan limit of between $6,000 and $20,500 in unsubsidized loans.
It’s important to remember that your child is responsible for paying back the federal student loans that they borrow. Your child’s school determines the total loan amount they can borrow and is responsible for any interest accrued on the loan (including any interest accrued while attending school).
Your child should speak to their school’s tax office before taking out student loans so they understand their responsibilities.
Find an endorser
Applying for an unsubsidized student loan is not the only option for your child if your Parents PLUS Loan is declined. Even if you cannot qualify for a Parent PLUS loan on your own, you can apply with an endorser, also known as a co-signer. An endorser can be anyone other than the student you are lending money to. The endorser has a financial obligation to repay the loan if you cannot.
You can ask anyone to be an endorser for your Parent PLUS loan, although many borrowers tend to ask other family members. Keep in mind that while your endorser is legally required to repay the loan if you are unable to do so, you should consider full repayment of the loan your sole responsibility. Failure to pay in full or on time will damage your credit rating.
It’s important to understand how student loans work before borrowing any amount.
Consider a personal student loan if your Parent PLUS loan is declined. Visit credible Compare interest rates on private student loans from different lenders in minutes.
Submit an appeal to have your application re-examined
If you are unable to find a sponsor, you may be able to appeal to have your application re-examined (depending on the circumstances of your credit history).
You submit your appeal to the US Department of Education if you meet one of two criteria:
- The credit report used was incorrect or has been corrected because you were declined.
- You have extenuating circumstances relating to the primary PLUS Borrower’s negative credit history.
Remember, whether you find a supporter or appeal to have your application re-examined, you must complete the PLUS Credit Counseling. The US Department of Education requires this course and you can take it at any time, although you must complete it within 30 days of the DOE determining that you have a negative credit history. You must complete the course in a single session, which typically lasts 20 to 30 minutes.
Consider alternative ways to reduce your child’s college costs
Student loans are helpful, but they’re not the only way your child can afford college. You can find alternative ways to reduce the cost of attending college without taking on private or federal student loans.
First, your child should review all funding options they may be eligible for, including scholarships and grants. They should also speak directly to their school’s financial aid office to see if they can negotiate a unique payment plan or do something else to help offset tuition.
Your child also has an opportunity to earn college credits through more affordable avenues. Consider going to a community college first and then going to a university. You can also take advantage of options to earn credits through university-recognized seminars, continuing education courses, or College-Level Examination Program (CLEP) exams.
If you decide that private student loans are the right course for you, visit Credible wherever you can Compare interest rates on private student loans without affecting your creditworthiness.